UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission File Number: 001-40551
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| |
||
(Address of principal executive offices) |
(Zip Code) | |
Registrant’s telephone number, including area code: (434 ) 297-1000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation Yes ☒ No ☐
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act. | Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
| Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule ☒
12b-2
of the Exchange Act). Yes ☐ No As of November 40,470,323 shares of common stock, $0.0001 par value per share, outstanding.
15
, 2021, the registrant had Table of Contents
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| PART I. |
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| Item 1. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| PART II. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q
including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following: • |
the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements; |
• |
our ability to obtain funding for our operations, including funding necessary to develop and commercialize ACU193, subject to necessary regulatory approvals; |
• |
the ability of our clinical trials to demonstrate the safety and efficacy of ACU193, and other positive results; |
• |
the therapeutic potential of ACU193, including its potential for improved safety and efficacy, as compared to other monoclonal antibodies in development, as well as the expectations concerning the INTERCEPT-AD trial; |
• |
the success, cost and timing of our development activities, nonclinical studies and clinical trials; |
• |
the timing and focus of our future clinical trials, and the reporting of data from those trials; |
• |
our plans relating to commercializing ACU193, subject to obtaining necessary regulatory approvals; |
• |
our ability to attract and retain key scientific and clinical personnel; |
• |
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately; |
• |
our reliance on third parties to conduct clinical trials of ACU193, and for the manufacture of ACU193 for nonclinical studies and clinical trials; |
• |
the success of competing therapies that are or may become available; |
• |
our plans and ability to obtain or protect our intellectual property rights, including extensions of existing patent terms where available; |
• |
the scope of protection we are able to establish and maintain for intellectual property rights covering ACU193 and technology; |
• |
potential claims relating to our intellectual property; |
• |
existing regulations and regulatory developments in the United States and other jurisdictions; |
• |
our ability to obtain and maintain regulatory approval of ACU193, and any related restrictions, limitations and/or warnings in the label of any approved product candidate; |
i
• |
our plans relating to the further development and manufacturing of ACU193, including additional therapeutic indications which we may pursue; |
• |
our ability to develop and maintain our corporate infrastructure, including our ability to remediate our existing material weakness and to design and maintain an effective system of internal controls; |
• |
our financial performance; |
• |
the effects of the ongoing COVID-19 pandemic; and |
• |
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act. |
You should not rely on forward-looking statements as predictions of future events. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the header “Risk Factors” and elsewhere in this Quarterly Report on Form
10-Q.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained herein. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form
10-Q
relate only to events as of the date on which the statements are made, and we undertake no obligation to update them to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q
or to reflect new information or the occurrence of unanticipated events, except as required by law. Unless the context otherwise indicates, references in this report to the terms “Acumen,” “the Company,” “we,” “our” and “us” refer to Acumen Pharmaceuticals, Inc.
We may announce material business and financial information to our investors using our investor relations website (www. investors.acumenpharm.com). We therefore encourage investors and others interested in Acumen to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls.
ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Acumen Pharmaceuticals, Inc.
Condensed Balance Sheets
(in thousands, except share and per share data)
September 30, 2021 |
December 31, 2020 |
|||||||
(Unaudited) |
||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Marketable securities, short-term |
— | |||||||
| Grant receivable |
||||||||
| Prepaid expenses and other current assets |
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| Total current assets |
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| Marketable securities, long-term |
— | |||||||
| Property and equipment, net |
— | |||||||
| Other assets |
— | |||||||
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| Total assets |
$ | $ | ||||||
| |
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| LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | $ | ||||||
| Accrued expenses and other current liabilities |
||||||||
| Preferred stock tranche rights liability |
— | |||||||
| Preferred stock warrant liability |
— | |||||||
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| Total liabilities |
||||||||
| Series A convertible preferred stock, $ |
— | |||||||
| Series A-1 convertible preferred stock, $ |
— | |||||||
| Series B convertible preferred stock, $ |
— | |||||||
| Stockholders’ deficit |
||||||||
| Preferred stock, $ |
— | |||||||
| Common stock, $ |
— | |||||||
| Additional paid-in capital |
||||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| Accumulated other comprehensive loss |
( |
) | — | |||||
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| Total stockholders’ equity (deficit) |
( |
) | ||||||
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| Total liabilities, convertible preferred stock and stockholders’ equity (deficit) |
$ | $ | ||||||
| |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
1
Acumen Pharmaceuticals, Inc.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
| Grant and other revenue |
$ | — | $ | $ | — | $ | ||||||||||
| Operating expenses |
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| Research and development |
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| General and administrative |
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| Total operating expenses |
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| |
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| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income (expense) |
||||||||||||||||
| Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability |
— | — | ( |
) | — | |||||||||||
| Interest income |
— | |||||||||||||||
| Interest expense |
( |
) | — | ( |
) | — | ||||||||||
| Other income |
— | — | ||||||||||||||
| |
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| Total other income (expense) |
— | ( |
) | |||||||||||||
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| Net loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
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| Other comprehensive loss |
||||||||||||||||
| Unrealized loss on marketable securities |
( |
) | — | ( |
) | — | ||||||||||
| |
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|
|||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| |
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| Net loss per common share, basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
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| Weighted-average shares outstanding, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
2
Acumen Pharmaceuticals, Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(Unaudited)
Three Months Ended September 30, 2021
Series A |
Series A-1 |
Series B |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity (Deficit) |
||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Convertible Preferred Stock |
Convertible Preferred Stock |
Common Stock |
|||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | — | $ | ( |
) | |||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock into common stock upon initial public offering |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | — | — | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash, net of issuance costs of $ |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock options exercised |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Unrealized loss on marketable securities |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||
| |
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|||||||||||||||||||||||||
| Balance as of September 30, 2021 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||
| |
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|||||||||||||||||||||||||
Three Months Ended September 30, 2020
Series A |
Series A-1 |
Series B |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Convertible Preferred Stock |
Convertible Preferred Stock |
Common Stock |
|||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2020 |
$ | $ | — | $ | — | $ | — | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
| |
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|||||||||||||||||||||||
| Balance as of September 30, 2020 |
$ | $ | — | $ | — | $ | — | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| |
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3
Acumen Pharmaceuticals, Inc.
Condensed Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share data)
(Unaudited)
Nine Months Ended September 30, 2021
Series A |
Series A-1 |
Series B |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Equity (Deficit) |
||||||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Convertible Preferred Stock |
Convertible Preferred Stock |
Common Stock |
|||||||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 |
$ | $ | $ | $ | — | $ | $ | ( |
) | $ | — | $ | ( |
) | ||||||||||||||||||||||||||||||||||
| Issuance of milestone shares for cash, net of issuance costs of $ |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Exercise of preferred stock warrant |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Reclassification of preferred stock tranche rights liability upon issuance of milestone shares |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Reclassification of warrant liability upon exercise of preferred stock warrant |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock into common stock upon initial public offering |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | — | — | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for cash, net of issuance costs of $ |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Cashless exercise of common stock warrants |
— | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock options exercised |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Unrealized loss on marketable securities |
— | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||
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| Balance as of September 30, 2021 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||||||||||
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Nine Months Ended September 30, 2020
Series A |
Series A-1 |
Series B |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||
Convertible Preferred Stock |
Convertible Preferred Stock |
Convertible Preferred Stock |
Common Stock |
|||||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2019 |
$ | $ | — | $ | — | $ | — | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
| Share-based compensation |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||
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| Balance as of September 30, 2020 |
$ | $ | — | $ | — | $ | — | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of these unaudited condensed financial statements.
4
Acumen Pharmaceuticals, Inc.
Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September 30, |
||||||||
2021 |
2020 |
|||||||
| Cash flows from operating activities |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
— | |||||||
| Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability |
— | |||||||
| Share-based compensation expense |
||||||||
| Amortization of premiums on marketable securities, net |
— | |||||||
| Non-cash interest income from marketable securities |
( |
) | — | |||||
| Changes in operating assets and liabilities: |
||||||||
| Grant receivable |
— | ( |
) | |||||
| Prepaid expenses and other current assets |
( |
) | ||||||
| Other assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ||||||
| Accrued expenses and other current liabilities |
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| |
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| Net cash used in operating activities |
( |
) | ( |
) | ||||
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| Cash flows from investing activities |
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| Purchases of available-for-sale |
( |
) | — | |||||
| Purchases of property and equipment |
( |
) | — | |||||
| |
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| Net cash used in investing activities |
( |
) | — | |||||
| |
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| Cash flows from financing activities |
||||||||
| Proceeds from issuance of Series B milestone shares, net of issuance costs |
— | |||||||
| Proceeds from exercise of Series A-1 warrant |
— | |||||||
| Proceeds from exercise of common stock warrants |
— | |||||||
| Proceeds from issuance of common stock upon initial public offering, net of issuance costs |
— | |||||||
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| Proceeds from stock option exercises |
— | |||||||
| Net cash provided by financing activities |
— | |||||||
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| Net change in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at the beginning of the period |
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| Cash and cash equivalents at the end of the period |
$ | $ | ||||||
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| Supplemental disclosure of cash flow information |
||||||||
| Cash paid for income taxes |
$ | $ | — | |||||
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| Cash paid for interest |
$ | $ | — | |||||
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| Supplemental disclosure of noncash financing activities |
||||||||
| Reclassification of preferred stock tranche rights liability upon share issuance |
$ | $ | — | |||||
| |
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| Reclassification of warrant liability upon exercise of preferred stock warrant |
$ | $ | — | |||||
| |
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|||||
| Conversion of convertible preferred stock into common stock upon initial public offering |
$ | $ | — | |||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Acumen Pharmaceuticals, Inc. (“Acumen” or the “Company”) was incorporated in 1996 in the state of Delaware. Acumen discovers and develops targeted therapies for the treatment of Alzheimer’s disease (“AD”). Acumen’s lead drug candidate, ACU193, is a humanized monoclonal antibody which selectively targets amyloid-beta oligomers (“A study of ACU193.
b
Os”). Acumen and Merck & Co., Inc. (“Merck”) discovered and developed ACU193 through an eight-year research collaboration. Acumen currently holds exclusive rights to the program. The Company submitted an Investigational New Drug Application (“IND”) for ACU193 to the Food and Drug Administration (“FDA”) in the fourth quarter of 2020. We initiated a Phase 1 clinical trial of ACU193 in patients with early AD in April 2021, which we have named “INTERCEPT-AD.”
Approximately 62 individuals with early AD (mild cognitive impairment or mild dementia due to AD) are expected to be randomized into this double-blind, placebo-controlled, first-in-human
INTERCEPT-AD
is designed to establish safety and proof of mechanism. It consists of single-ascending-dose (“SAD”) and multiple-ascending-dose (“MAD”) cohorts and is designed to evaluate the safety, tolerability, pharmacokinetics (“PK”), and target engagement of intravenous doses of ACU193. In October 2021, the Company announced the initial dosing of the first patient in the INTERCEPT-AD trial and subsequently successfully cleared the sentinel safety review. Clinical trial site activation and patient recruitment and enrollment is ongoing and, subject to the rate of site activation and patient recruitment, the Company continues to anticipate topline data from this trial by the end of 2022.
The Company is subject to the uncertainty of whether the Company’s intellectual property will develop into successful commercial products.
November 2020 Reverse Stock Split
On November 20, 2020, the Company effected a
1-for-30
reverse
June 2021 Reverse Stock Split
The Company’s Board of Directors (“Board”) approved a reverse split of shares of the Company’s common stock and convertible preferred stock on a
1-for-1.49
Initial Public Offering
On July 6, 2021, the Company issued 9,999,999 shares of common stock in an initial public offering (“IPO”), and on July 8, 2021, the Company issued an additional 1,499,999 shares of common stock that were purchased by the underwriters pursuant to the underwriters’ option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was $16.00 . The aggregate net proceeds from the Company’s IPO, after underwriting discounts and commissions and other offering expenses of $15.4 million, were $168.6 million.
On July 6, 2021, in connection with the closing of the IPO, 477,297 shares of Series A, 7,985,305 shares of Series 19,770,070 shares of Series B convertible preferred stock, respectively, automatically converted into an equal number of shares of common stock. Warrants to purchase shares of common stock were automatically net exercised for the purchase of an aggregate of 178,847 shares of common stock.
A-1,
and As a result of the IPO, the underwriters’ exercise of their option, the conversions of the Series A, 39,911,517 immediately following the closing of the IPO.
A-1
and B convertible preferred stock, and the exercise of the warrants, the Company’s total number of outstanding common shares increased by 6
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Liquidity and Capital Resources
The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of September 30, 2021 and December 31, 2020, the Company had an accumulated deficit of $119.2 million and $27.0 million, respectively, and working capital of $203.4 million and $38.1 million, respectively. Prior to the IPO, the Company historically relied on raising capital from venture capital firms and private investors and funding from a government grant to finance its operations.
On June 9, 2021, the Board and the holders of more than 67 % of the then outstanding shares of Series B convertible preferred stock held by the Series B purchasers (the “Requisite Investors”) elected to waive the achievement of the milestone subject to the terms and conditions of the Series B Preferred Stock Purchase Agreement (the “Series B Agreement”) and consummate the subsequent closing (the “Milestone Closing”) (see Note 5). On June 17, 2021, the Milestone Closing for the Series B convertible preferred stock occurred, resulting in the sale of 7,908,027 shares of Series B convertible preferred stock at $3.80 per share for gross proceeds of $30.0 million.
As a result of the Milestone Closing and the closing of the Company’s IPO on July 6, 2021, management believes that its existing cash and cash equivalents and marketable securities will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements at least through 2024. Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of the Company’s products. The Company may need to obtain additional financing to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. Until such time, if ever, the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that such financing will be available on terms acceptable to the Company, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation of other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts.
In October 2021, the Company announced the initial dosing of the first patient in the INTERCEPT-AD trial and subsequently successfully cleared its sentinel safety review. Clinical trial site activation and patient recruitment and enrollment is ongoing. The Company has experienced delays in clinical site activation and patient enrollment in
INTERCEPT-AD,
which the Company believes is a result of the ongoing coronavirus (“COVID-19”)
pandemic, which may delay the expected timeline of INTERCEPT-AD.
The Company believes that early in the third quarter of 2021, the Delta variant of COVID-19,
in particular, negatively impacted the Company’s ability to activate clinical trial sites as planned as a result of trial sites, especially in certain geographies within the United States that have been experiencing relatively higher rates of COVID-19, requiring more time to implement site activation requirements and enrollment efforts being impeded by lower-than-expected willingness of potential patients to visit active sites for screening. Management believes that the decline in COVID-19
infections late in the third quarter of 2021 and continuing into the fourth quarter of 2021 should enable the Company to move forward in activating more sites and expanding the overall clinical trial footprint of INTERCEPT-AD.
Subject to the rate of site activation and patient recruitment, the Company continues to anticipate topline data from this trial by the end of 2022. The ultimate impact of the COVID-19
pandemic on the Company’s business, results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19
pandemic on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s business, results of operations, financial position and cash flows may be materially adversely affected. NOTE 2. BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying condensed financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form
10-Q
and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period. 7
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Emerging Growth Company
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s condensed financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended, the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts and historical experience, as well as other pertinent industry and regulatory authority information, including the potential future effects of the
COVID-19
pandemic, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. The Company’s cash equivalents consist of funds held in several money market accounts. The Company had $134.8 million and $36.8 million in cash equivalents as of September 30, 2021 and December 31, 2020, respectively.
Marketable Securities
The Company considers its debt securities to be securities. securities are classified as cash equivalents, or as short-term or long-term marketable securities based on the maturity date at time of purchase and their availability to meet current operating requirements. Marketable securities that mature in three months or less from the date of purchase are classified as cash equivalents. Marketable securities, excluding cash equivalents, that mature in one year or less are classified as short-term securities and are reported as a component of current assets.
available-for-sale
Available-for-sale
available-for-sale
Securities that are classified as are measured at fair value with temporary unrealized gains and losses reported in other comprehensive loss, and as a component of stockholders’ deficit until their disposition or maturity. See “Fair Value of Financial Instruments” below. The Company reviews all securities at each period end to determine if they remain based on the Company’s current intent and ability to sell the security if it is required to do so. Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method.
available-for-sale
available-for-sale
available-for-sale
Marketable securities are subject to a periodic impairment review. The Company may recognize an impairment charge when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary. In determining whether a decline in market value is other-than-temporary, various factors are considered, including the cause, duration of time and severity of the impairment, any adverse changes in the investees’ financial condition and the Company’s intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery in market value. Declines in value judged to be other-than-temporary are included in the Company’s condensed statements of operations and comprehensive loss. The Company did no
8
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents and marketable securities. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s deposits are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses on these deposits. The Company’s marketable securities portfolio consists primarily of investments in money market funds, commercial paper and short-term high credit quality corporate debt securities.
Fair Value of Financial Instruments
The Company’s financial assets and liabilities are accounted for in accordance with Accounting Standards Codification (“ASC”) 820,s which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Fair Value Measurements and Disclosure
,
Level 1— Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3—Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgement. Accordingly, the degree of judgement exercised by management in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The carrying values reported in the Company’s condensed balance sheets for cash (excluding cash equivalents which are recorded at fair value on a recurring basis), grant receivable, accounts payable, and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.
The following tables present the Company’s fair value hierarchy for its money market securities, marketable securities, preferred stock tranche rights liability and preferred stock warrant liability measured at fair value on a recurring basis (in thousands):
available-for-sale
Fair value measurements at reporting date using |
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Fair Value at September 30, 2021 |
|||||||||||||
| Assets included in: |
||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||
| Money market securities |
$ | $ | — | $ | — | $ | ||||||||||
| Marketable securities |
||||||||||||||||
| Commercial paper |
— | — | ||||||||||||||
| Corporate debt securities |
— | — | ||||||||||||||
| Asset-backed securities |
— | — | ||||||||||||||
| U.S. treasury securities |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total fair value |
$ | $ | $ | — | $ | |||||||||||
| |
|
|
|
|
|
|
|
|||||||||
9
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Fair value measurements at reporting date using |
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Fair Value at December 31, 2020 |
|||||||||||||
| Assets included in: |
||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||
| Money market securities |
$ | $ | — | $ | — | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total fair value |
$ | $ | — | $ | — | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Liabilities included in: |
||||||||||||||||
| Preferred stock tranche rights liability |
$ | — | $ | — | $ | $ | ||||||||||
| Preferred stock warrant liability |
— | — | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total fair value |
$ | — | $ | — | $ | $ | ||||||||||
| |
|
|
|
|
|
|
|
|||||||||
The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets.
The Company’s portfolio of marketable securities is comprised of commercial paper, asset-backed securities, U.S. treasury securities and short-term highly liquid, high credit quality corporate debt securities. The fair value for the marketable securities is determined based on valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.
available-for-sale
Refer to Note 5 for further information about the Level 3 rollforward of activity and Level 3 inputs.
Grant Receivable
Grant receivable consists of research expenses reimbursable under a grant from the National Institute of Health (“NIH”). The Company carries its grant receivable at the unreimbursed amount. On a periodic basis, the Company evaluates its grant receivable to determine whether an allowance is required. The allowance is management’s best estimate of probable losses. Management determined that no allowance was necessary as of September 30, 2021 and December 31, 2020.
Property and Equipment
Property and equipment consists primarily of computer equipment and is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which is generally three years for computer-related assets.
Convertible Preferred Stock
The Company recorded shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The Company applied the guidance in ASC and therefore classified the Series A, Series
480-10-S99-3A,
SEC Staff Announcement: Classification and Measurement of Redeemable Securities
A-1
and Series B convertible preferred stock as mezzanine equity. The convertible preferred stock was recorded outside of stockholders’ deficit because, in the event of certain deemed liquidation events considered not solely within the Company’s control, such as a merger, acquisition and sale of all or substantially all of the Company’s assets (a “Deemed Liquidation Event”), the convertible preferred stock would have become redeemable at the option of the holders. In the event of a change of control of the Company, proceeds received from the sale of such shares would have been distributed in accordance with the corresponding liquidation preferences. The Company did not adjust the carrying values of the convertible preferred stock to the deemed liquidation values of such shares since a liquidation event was not probable at any of the reporting dates. As mentioned above in Note 1, in connection with the closing of the IPO, all of the outstanding shares of Series A, Series
A-1
and Series B convertible preferred stock automatically converted into an equal number of shares of common stock on July 6, 2021. 10
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Preferred Stock Tranche Rights Liability
The Company determined that its obligation to issue, and the Company’s investors’ right to purchase, additional shares of Series B convertible preferred stock pursuant to the Milestone Closing (see Note 1 and Note 5) represented a freestanding financial instrument (the “tranche liability”). The tranche liability was initially recorded at fair value. The proceeds from the sale of the convertible preferred stock were first allocated to the fair value of the tranche liability with the remaining proceeds from the sale of the convertible preferred stock allo
c
ated to the Series B convertible preferred stock. The tranche liability was remeasured at each reporting period and upon the exercise of the obligation, with gains and losses arising from subsequent changes in its fair value recognized in other income and expense in the condensed statements of operations and comprehensive loss. As discussed above in Note 1, the Milestone Closing occurred on June 17, 2021 and, as a result, the remaining value of the tranche liability was reclassified to convertible preferred stock on the condensed balance sheet. Preferred Stock Warrant Liability
The Company accounted for the warrant to purchase Series
A-1
convertible preferred stock as a liability as this warrant was a freestanding financial instrument that required the Company to transfer assets upon exercise. The warrant liability was initially recorded at fair value. The warrant liability was remeasured at each reporting period and upon the exercise of the applicable warrant, with gains and losses arising from subsequent changes in its fair value recognized in other income and expense in the condensed statements of operations and comprehensive loss. The warrant was exercised on June 22, 2021, and the remaining value of the warrant liability was reclassified to convertible preferred stock on the condensed balance sheet. There were no preferred stock warrants outstanding as of September 30, 2021. Common Stock Warrants
The Company assesses whether warrants issued require accounting as derivatives. The Company determined that its common stock warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with FASB ASC Topic 815,. As such, the Company concluded the warrants met the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity. In June 2021, several holders of warrants to purchase the Company’s common stock exercised their warrants and purchased a total of 137,446 shares of common stock at an exercise price of $4.47 . On July 6, 2021, in connection with the closing of the Company’s IPO, the Company issued 178,847 shares of common stock in exchange for the 248,247 outstanding common stock warrants at an exercise price of $4.47 . There were no common stock warrants outstanding as of September 30, 2021.
Derivatives and Hedging
Grant and Other Revenue Recognition
The Company’s NIH grant is not within the scope of ASC 606, (“ASC 606”) as the grant does not meet the definition of a contract with a customer. The Company has concluded that the grant meets the definition of a contribution and is a Recognition does not apply, as Acumen is a business entity and the grant is with a governmental agency.
Revenue from Contracts with Customers
,
non-reciprocal
transaction, and management has also concluded that Subtopic 958-605,
Not-for-Profit-Entities-Revenue
In the absence of applicable guidance under U.S. GAAP, the Company’s policy is to recognize grant revenue when the related costs are incurred and the right to payment is realized. Costs incurred are recorded in research and development and general and administrative expenses on the accompanying condensed statements of operations and comprehensive loss.
The Company believes the recognition of revenue as costs are incurred and amounts become realizable is analogous to the concept of transfer of control of a service over time under ASC 606.
Research and Development Expenses
Research and development expenses primarily consist of consultants and materials, biologic storage, salaries and other personnel-related expenses related to research and development activities and are expensed as incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected on the condensed balance sheets as prepaid or accrued expenses. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs.
11
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Share-based Compensation
The Company expenses share-based compensation to employees,
non-employees
and board members over the requisite service period based on the estimated grant-date fair value of the awards and actual forfeitures. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, which requires the use of a number of complex assumptions including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends, and the expected term of the option. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Share-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. All share-based compensation costs are recorded in research and development expense or general and administrative expense in the condensed statements of operations and comprehensive loss based upon the respective employee’s or non-employee’s
roles within the Company. Forfeitures are recorded as they occur. See also Note 7 below.
Income Taxes
Income taxes are recorded in accordance with ASC 740, (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, and net operating loss (“NOL”) carryforwards and research and development tax credit (“R&D Credit”) carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero. In the event the Company were to determine that it would be able to realize some or all its deferred income tax assets in the future, an adjustment to the deferred income tax asset valuation allowance would increase income in the period such determination was made.
Income Taxes
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company has no No
Net Loss Per Share of Common Stock
Basic net loss per share of common stock is calculated using the
two-class
method under which earnings are allocated to both common shares and participating securities based on their participation rights. Net loss attributable to common stockholders was not allocated to the convertible preferred stock as the holders of the convertible preferred stock did not have a contractual obligation to share in any losses. Basic net loss per share is calculated by dividing the net loss attributable to common shares by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by dividing the net loss using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of stock options and warrants to purchase common stock (using the treasury stock method), and the conversion of convertible preferred stock and the preferred warrant (using the if-converted
method). See Note 9 below. Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment.
12
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU , as amended, with guidance regarding the accounting for and disclosure of leases. This update requires lessees to recognize the liabilities related to all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. This guidance will become effective for the Company for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The adoption of Topic 842 is not expected to have a material impact on the financial statements.
No. 2016-02,
Leases (Topic 842)
In June 2016, the FASB issued , which was codified with its subsequent amendments as ASC 326. ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updated guidance is effective for the Company for annual reporting periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.
ASU 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
In December 2019, the FASB issued ASU (“ASU
No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
2019-12”),
which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12
removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements. NOTE 3. MARKETABLE SECURITIES
Marketable securities consisted of the following as of September 30, 2021 (in thousands):
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
Available-for-sale |
||||||||||||||||
Commercial paper |
$ | $ | — | $ | — | $ | |
|||||||||
Corporate debt securities |
— | ( |
) | |||||||||||||
Asset-backed securities |
— | ( |
) | |||||||||||||
Total available-for-sale |
— | ( |
) | |||||||||||||
Available-for-sale |
||||||||||||||||
Corporate debt securities |
— | ( |
) | |||||||||||||
Asset-backed securities |
— | ( |
) | |||||||||||||
U.S. treasury securities |
— | — | ||||||||||||||
Total available-for-sale |
— | ( |
) | |||||||||||||
Total available-for-sale |
$ | |
$ | — | $ | ( |
) | $ | ||||||||
As of September 30, 2021, the Company’s securities classified as short-term mature in one year or less and the Company’s securities classified as long-term mature within two years . All of the Company’s marketable securities in an unrealized loss position as of September 30, 2021 were in a loss position for less than twelve months. Unrealized losses on securities as of September 30, 2021 were not significant and were primarily due to changes in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Accordingly, no
available-for-sale
available-for-sale
available-for-sale
available-for-sale
13
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
NOTE 4. SUPPLEMENTAL FINANCIAL INFORMATION
Prepaid expenses and other current assets consisted of the following (in thousands):
September 30, 2021 |
December 31, 2020 |
|||||||
| Prepaid insurance |
$ | $ | ||||||
| Research and development service agreements |
||||||||
| Prepaid raw materials |
||||||||
| Other |
||||||||
| |
|
|
|
|||||
| Total prepaid expenses and other current assets |
$ | $ | ||||||
| |
|
|
|
|||||
Accrued expenses and other current liabilities consisted of the following (in thousands):
September 30, 2021 |
December 31, 2020 |
|||||||
| Bonuses and other employee liabilities |
$ | $ | — | |||||
| Research and development |
||||||||
| Other |
||||||||
| Professional fees |
||||||||
| |
|
|
|
|||||
| Total accrued expenses and other current liabilities |
$ | $ | ||||||
| |
|
|
|
|||||
NOTE 5. CONVERTIBLE PREFERRED STOCK, TRANCHE LIABILITY AND WARRANT LIABILITY
Convertible Preferred Stock
On November 20, 2020, the Company entered into the Series B Agreement for a private placement of up to 19,770,070 shares of Series B convertible preferred stock, $0.0001 par value per share, at an original issuance price of $3.80 per share, subject to separate closings, including: (1) 11,862,043 shares at the Initial Closing on November 20, 2020, and (2) 7,908,027 shares at a subsequent closing that would be triggered by the achievement of a specific clinical milestone. The Series B Agreement obligated the Company to issue and sell and the Series B purchasers to purchase up to a total of 7,908,027 additional shares of Series B convertible preferred stock (the “Milestone Shares”) at the same price per share upon the achievement of a certain defined clinical milestone. The determination as to whether the milestone event has been met was subject to certification by the Board and the Requisite Investors. Each Series B convertible preferred stock investor had the right, but not the obligation, to purchase all or any portion of the Milestone Shares at any time in its sole option and in its sole and absolute discretion, whether or not the Company achieved the applicable clinical milestone. See “” below.
Series B Convertible Preferred Stock Tranche Rights Liability
As discussed above in Note 1, on June 9, 2021, the Board and the Requisite Investors elected to waive the achievement of the milestone subject to the terms and conditions of the Series B Agreement and consummate the Milestone Closing and, on June 17, 2021, the Milestone Closing occurred, resulting in the sale of 7,908,027 shares of Series B convertible preferred stock at $3.80 per share for gross proceeds of $30.0 million, bringing the total number of Series B convertible preferred shares outstanding to 19,770,070 .
On June 22, 2021, a warrant to purchase 447,426 shares of Series 2.794 per share was exercised (see below), bringing the total number of Series 7,985,305 .
A-1
convertible preferred stock at an exercise price of $“Series
A-1
Convertible Preferred Stock Warrant Liability”A-1
convertible preferred shares outstanding to Additionally, on July 6, 2021, in connection with the closing of the IPO, 477,297 shares of Series A, 7,985,305 shares of Series 19,770,070 shares of Series B convertible preferred stock, respectively, automatically converted into an equal number of shares of common stock. There were no shares of convertible preferred stock outstanding as of September 30, 2021.
A-1,
and 14
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Convertible preferred stock consisted of the following as of Dec
e
mber 31, 2020 (in thousands, except share and per share data): Shares Authorized |
Shares Issued and Outstanding |
Weighted Average Issuance Price per Share |
Carrying Value |
Liquidation Preference |
||||||||||||||||
| Series A |
$ | $ | $ | |||||||||||||||||
| Series A-1 |
||||||||||||||||||||
| Series B |
||||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||||||
Dividends
The holders of Series B, Series
A-1
and Series A convertible preferred stock were entitled to receive dividends ahead of, or simultaneously with, common stockholders in an amount equal to the product of (A) the dividend payable on each share of the class or series of convertible preferred stock determined, if applicable, as if all shares of such class or series of convertible preferred stock had been converted into common stock and (B) the number of shares of common stock issuable upon conversion of a share of preferred stock. No dividends have been declared since inception. Liquidation preference
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series B convertible preferred stock were entitled to receive, prior and in preference to, holders of Series
A-1
convertible preferred stock, Series A convertible preferred stock, and holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series B convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series B convertible preferred stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series
A-1
convertible preferred stock were entitled to receive, prior and in preference to, holders of Series A convertible preferred stock and holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series A-1
convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series A-1
convertible preferred stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of Series A convertible preferred stock were entitled to receive, prior and in preference to, holders of common stock, in the amount of the original issue price plus any declared but unpaid dividends thereon. If upon occurrence of such an event, the assets and funds to be distributed among the holders of Series A convertible preferred stock were insufficient to permit full payment to such holders, the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of the Series A convertible preferred stock.
Conversion rights
Shares of all series of convertible preferred stock were convertible into such number of fully paid and
non-assessable
shares of common stock as determined by dividing the original issuance price for such series by the applicable conversion price for such series then in effect. The initial conversion price per share for each series of convertible preferred stock was the original issue price applicable to such series as shown in the table above, subject to adjustment in the event of certain dilutive issuances. The convertible preferred stock original issuance price and conversion price were each subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the convertible preferred stock. Each share of convertible preferred stock was convertible at any time at the option of the holder at the conversion ratio then in effect. In addition, each share of convertible preferred stock was to be automatically converted into common stock at the conversion ratio then in effect upon either (a) the closing of an underwritten public offering resulting in gross proceeds to the Company of at least $75 million and at a price per share equal to at least two times the Series B original issuance price, or $7.60 (subject to adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B convertible preferred stock), or (b) the date and time, or the occurrence of an event, specified in such vote or written consent of at least 67 % of the holders of the then outstanding shares of Series B convertible preferred stock.
15
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
If any Series B purchaser failed to purchase its respective portion of the Milestone Shares upon occurrence of the Milestone Closing, each existing share of Series B convertible preferred stock held by such stockholder would have automatically converted into one share of common stock two days after the Milestone Closing.
On July 6, 2021, in connection with the closing of the IPO, each outstanding share of Series A, Series
A-1
and Series B convertible preferred stock converted into one share of common stock. Voting rights
Holders of convertible preferred stock were entitled to vote as a single class together with the holders of common stock and had one vote for each share of common stock into which the convertible preferred stock was convertible.
The holders of Series B convertible preferred stock were entitled to elect two directors to the Board, and the holders of Series A and Series
A-1
convertible preferred stock, voting together as a single class, were also entitled to elect two directors to the Board. The holders of common stock, exclusively and as a separate class, are entitled to elect two directors to the Board. The final director to the Board was designated by the holders of a majority of the shares of the preferred stock and common stock, voting together as a single class. A majority of the outstanding shares of convertible preferred stock was necessary for approving certain matters, including the ability to either increase or decrease the authorized number of directors constituting the Board, pursuant to protective provisions in the Company’s amended and restated certificate of incorporation.
Series B Convertible Preferred Stock Tranche Rights Liability
The Company concluded that the tranche liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series B convertible preferred stock. The fair value for the tranche liability was estimated as a forward contract using a valuation model, calibrated at issuance. The valuation model at issuance estimated the implied value of the Series B stock as of the expected milestone date utilizing the probability of milestone achievement, expected timing of milestone achievement, and risk-free rate. The model was calibrated such that the value of the initial tranche and the forward contract were equal to the initial tranche proceeds at issuance. Subsequently, the fair value of the liability was discounted to the valuation date and adjusted for probability of the achievement of the milestone event. The calibrated valuation model was updated as of December 31, 2020, March 31, 2021 and in the Stay Private scenario utilized in the hybrid methodology as of June 17, 2021 (the date of the Milestone Closing). Significant estimates and assumptions impacting fair value include the discount rate, expected time to the Milestone Closing, and probability of the Milestone Closing. The discount rate was equal to the risk-free rate commensurate with the estimated timing of the Milestone Closing.
The following assumptions were used in the estimation of the fair value of the tranche liability as a forward contract as of each of the dates indicated:
June 17, |
December 31, |
|||||||
2021 |
2020 |
|||||||
| Risk-free interest rate |
% | % | ||||||
| Expected time to Milestone Closing (in years) |
||||||||
| Probability of achievement of Milestone Closing |
% | % | ||||||
For the other portion of the hybrid method used as of June 17, 2021, the fair value for the tranche liability was estimated based upon an allocation of the underlying equity value, which was determined using an IPO value as estimated through analysis of IPOs for comparable guideline companies, to arrive at a value per share in the IPO scenario. The estimated fair value of the tranche liability was $81,190,000 and $5,033,000 as of the Milestone Closing on June 17, 2021 and December 31, 2020, respectively. The significant increase in the June 17, 2021 valuation stems from both a shift in methodology from an option pricing method (“OPM”) to a Hybrid Model where the concluded value of the forward tranche is derived by the sum of the probability weighted present value of the forward tranche in the Stay Private and IPO scenarios (with the former including all other potential exit scenarios other than an imminent IPO), as well as the increase in the probability of achievement of the Milestone Closing. The resulting difference in estimated fair value was recognized as a change in fair value within other income in the accompanying condensed statements of operations.
16
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The tranche liability was revalued each reporting period with the change in fair value recorded in the accompanying condensed statements of operations and comprehensive loss through the issuance of the Milestone Shares on June 17, 2021. Following the Milestone Closing, the remaining tranche liability was reclassified to convertible preferred stock on the condensed balance sheet.
Series
A-1
Convertible Preferred Stock Warrant Liability On October 19, 2018, the Company issued a 10 -year warrant (the “Series 447,426 shares of Series 2.794 on or before October 18, 2028 .
A-1
Warrant”) to purchase up to an aggregate of A-1
convertible preferred stock at an exercise price of $The warrant liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series
A-1
convertible preferred stock. As such, it was revalued each reporting period with the change in fair value recorded in the accompanying condensed statements of operations and comprehensive loss until the warrant was exercised on June 22, 2021. The fair value of the warrant liability was estimated using the OPM backsolve method as of December 31, 2020 and using a hybrid method, which included an OPM backsolve in the Stay Private scenario as of June 22, 2021. The following assumptions were used in the estimation of the fair value of the warrant liability using the OPM backsolve method as of each of the dates indicated:
June 22, 2021 |
December 31, 2020 |
|||||||
| Risk-free interest rate |
% | % | ||||||
| Expected term (in years) |
||||||||
| Expected volatility |
% | % | ||||||
| Expected dividend yield |
% | % | ||||||
The hybrid method used to value the warrant liability at June 22, 2021 considered both the underlying equity value determined using the OPM backsolve method in a Stay Private scenario, as well as the underlying equity value that was determined using an expected IPO value as estimated through analysis of IPOs for comparable guideline companies, to arrive at a value per share in the IPO scenario. The underlying equity values from each approach were probability weighted based upon the expected likelihood of each scenario. The fair value of the warrant liability was estimated to be $12.02 and $0.85 as of June 22, 2021 and December 31, 2020, respectively.
The following table provides a reconciliation of the tranche liability and warrant liability measured at fair value using Level 3 significant unobservable inputs (in thousands):
Series A-1 Preferred Stock Warrant |
Series B Tranche Rights |
Total |
||||||||||
| Balance, December 31, 2020 |
$ | $ | $ | |||||||||
| Change in fair value |
||||||||||||
| Settlement of tranche liability due to issuance of Milestone Shares |
— | ( |
) | ( |
) | |||||||
| Settlement of warrant liability upon exercise of warrant |
( |
) | — | ( |
) | |||||||
| |
|
|
|
|
|
|||||||
| Balance, September 30, 2021 |
$ | $ | $ | |||||||||
| |
|
|
|
|
|
|||||||
17
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
NOTE 6. STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized Shares
On July 6, 2021, the Company issued 9,999,999 shares of common stock in an and on July 8, 2021, the Company issued an additional 1,499,999 shares of common stock that were purchased by the underwriters pursuant to the underwriters’ option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was $16.00 . The aggregate net proceeds from the Company’s IPO, after underwriting discounts and commissions and other offering expenses of $15.4 million, were $168.6 million.
IPO,
Effective upon the closing of the IPO on July 6, 2021, the Company amended its certificate of incorporation such that the total number of shares of all classes of capital stock authorized to be issued was increased to 310,000,000 , with 10,000,000 shares designated as preferred stock with a par value of $0.0001 , and 300,000,000 shares designated as common stock with a par value of $0.0001 .
The Company amended its certificate of incorporation on November 20, 2020, such that the total number of shares of common stock authorized to be issued was increased to 50,500,000 , and the total number of shares of preferred stock authorized to be issued was increased to 42,066,830 , of which 711,203 were designated Series A convertible preferred stock, 11,898,177 were designated as 29,457,450 were designated as Series B convertible preferred stock. The certificate of incorporation was also amended for the reverse stock splits that became effective on June 23, 2021 and November 20, 2020, but there were no changes to the authorized shares as a result of the reverse stock split that became effective on June 23, 2021 (see Note 1).
Series A-1 convertible
preferred stock and Common Stock
As of September 30, 2021, the Company’s Amended and Restated Certificate of Incorporation authorized the issuance of 300,000,000 shares of common stock, $0.0001 par value per share. Each share of common stock is entitled to one voting right.
Common Stock Warrants
In accordance with ASC 815, the common stock warrants issued in 2014 through 2017 did not meet the definition of a derivative and were classified in stockholders’ deficit in the condensed consolidated balance sheets.
In June 2021, several holders of warrants to purchase the Company’s common stock exercised their warrants and purchased a total of 137,446 shares of common stock at an exercise price of $4.47 , leaving 248,247 common stock warrants outstanding as of June 30, 2021. On July 6, 2021, the Company issued 178,847 shares of common stock in exchange for the remaining 248,247 outstanding common stock warrants at an exercise price of $4.47 . As of September 30, 2021, there were no common stock warrants outstanding.
As of December 31, 2020, the outstanding warrants to purchase the Company’s common stock were comprised of the following:
Equity Upon Exercise |
Exercise Price |
Expiration Dates |
Number of Warrants |
|||||||||||||
Warrants issued in 2014 |
Common Stock | $ | ||||||||||||||
Warrants issued in 2015 |
Common Stock | $ | ||||||||||||||
Warrants issued in 2016 |
Common Stock | $ | ||||||||||||||
Warrants issued in 2017 |
Common Stock | $ | ||||||||||||||
Total Warrants |
||||||||||||||||
18
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
N
OTE 7. SHARE-BASED COMPENSATION 2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options to employees, and the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants, became effective on June 30, 2021. Initially, the maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan was 7,698,282 shares, which is the sum of (1) 3,550,000 new shares, plus (2) 5 % of the total number of shares of the Company’s common stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or a lesser number of shares determined by the Board prior to the applicable January 1. The maximum number of shares of the Company’s common stock that may be issued upon the exercise of incentive stock options under the 2021 Plan is 12,000,000 . As of September 30, 2021, 4,217,104 shares were authorized for issuance under the 2021 Plan and 4,033,681
667,104
shares that remained available for issuance under the Company’s Amended and Restated Stock Performance Plan that was adopted by the Board and stockholders on April 8, 2013 (as amended from time to time, most recently on November 20, 2020, the “2013 Plan”) at the time the 2021 Plan became effective, plus (3) any shares subject to outstanding stock options or other stock awards that were granted under the 2013 Plan that, on or after the 2021 Plan became effective, terminate or expire prior to exercise or settlement, are settled in cash, are forfeited or repurchased because of the failure to vest, or are reacquired or withheld to satisfy a tax withholding obligation or the purchase or exercise price in accordance with the terms of the 2013 Plan. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to shares remained available for issuance under the 2021 Plan. The 2013 Plan provided for the grant of incentive stock options, nonstatutory stock options, issuance of shares of restricted stock and other equity awards to the Company’s employees, officers, directors, consultants and advisors. All outstanding awards issued under the 2013 Plan remain subject to the terms of the 2013 Plan. As of September 30, 2021, there were 3,478,942 options outstanding under the 2013 Plan.
Stock Options
The Black-Scholes option-pricing model was used to estimate the fair value of stock options granted during the nine months ended September 30, 2021 with the following weighted average assumptions:
Risk-free interest rate |
% | |||
Expected term in years |
||||
Expected volatility |
% | |||
Expected dividend yield |
% |
The weighted average grant date fair value of options granted during the nine months ended September 30, 2021, was $1.34 per share. There were no options granted during the three months ended September 30, 2021, nor did the Company grant any options during the three or nine months ended September 30, 2020.
The fair value of the Company’s common stock underlying the stock options has historically been determined by the Board with assistance from management and, occasionally with input from an independent third-party valuation firm. For the year ended December 31, 2020, management engaged an independent third-party valuation firm to provide an estimate of the fair value of its common stock. The fair value of common stock was determined considering a number of objective and subjective factors, including valuations of comparable companies, sales of convertible preferred stock, operating and financial performance, the lack of liquidity of the Company’s common stock and the general and industry-specific economic outlook.
As of June 30, 2021, the date of the last option grant, and December 31, 2020
management estimated the fair value of a share of common stock to be $,
Risk-free interest rate |
% | |||
Expected time to liquidity event in years |
||||
Expected volatility |
% | |||
Expected dividend yield |
% |
19
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The stock options granted after December 31, 2017 vest monthly over 24 or 36 months and have a ten-year contractual term. Stock options granted prior to December 31, 2017 were either fully vested upon grant or generally vested monthly over a range of to 24 months and have a
ten-year
The following table reflects summarized stock option activity:
Stock Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value (in thousands) |
|||||||||||||
| Outstanding at December 31, 2020 |
$ | |||||||||||||||
| Granted |
||||||||||||||||
| Exercised |
( |
) | ||||||||||||||
| |
|
|||||||||||||||
| Outstanding at September 30, 2021 |
$ | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Vested and exercisable at September 30, 2021 |
$ | $ | ||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
As of September 30, 2021, total unrecognized compensation costs related to unvested stock option awards granted was approximately $3.1 million, which the Company expects to recognize over a weighted-average period of approximately 3.2 years.
T
he Company recorded share-based compensation expense related to stock options in the following expense categories of its condensed statements of operations and comprehensive loss for the periods shown: Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
| General and administrative |
$ | $ | $ | $ | ||||||||||||
| Research and development |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total share-based compensation |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”), which permits employees to purchase shares of the Company’s common stock, became effective on June 30, 2021. A total of 375,000 shares of the Company’s common stock were initially reserved for sale under the ESPP. The number of shares of the Company’s common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2022 through January 1, 2031, by the lesser of (1) 1 % of the total number of shares of the Company’s common stock outstanding on the last day of the fiscal year before the date of the automatic increase, and (2) 800,000 shares; provided that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). As of September 30, 2021, there have been no purchases of shares under the ESPP.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.
Leases
The Company has been subleasing space in Indiana since March 1, 2020, under a lease that initially expired on December 31, 2020. The Company executed a new sublease for this space that was effective February 1, 2021. The term of the sublease is for 31 months, expiring on August 30, 2023. The Company pays monthly rent of $12,719 and is allowing others to sublease a portion of the space from the Company for less than a 293,000 .
one-year
period. As of September 30, 2021, the remaining aggregate minimum rent obligation over the remaining term was approximately $20
Acumen Pharmaceuticals, Inc.
Notes to Condensed Financial Statements
(Unaudited)
As of September 30, 2021, future minimum lease payments under this lease agreement associated with the Company’s operations were as follows (in thousands):
| Year ended December 31, 2021 (remaining 3 months) |
$ | |||
| Year ended December 31, 2022 |
||||
| Year ended December 31, 2023 |